To many, the job outlook still feels bleak, a carry-over from the 1990s when many corporations expanded too fast. Investors, too, haven't returned to bullish ways, waiting instead for boomtime profits to reappear. And shoppers, carrying more debt than ever, are in no mood to party like it's 1999.

Oil and gasoline prices, moreover, are up sharply from last year - a hint of the economic uncertainties posed by America's showdown with Iraqi leader Saddam Hussein.

All this puts a drag on what most economists still view as a period of economic recovery. Consumer confidence declined sharply in December, largely due to a discouraging job outlook, a private research group reported Tuesday. The New York-based Conference Board said its Consumer Confidence Index dropped to 80.3 from a revised 84.9 in November. Analysts had been expecting a reading of 88.0.

So far, consumer spending has been vital in lifting the economy out of the recession that began in March 2001 - a slump that has not been declared officially over.

But now, "households are finally facing up to the fact they are poorer for three years running," says Paul Kasriel, an economist at Northern Trust Co. in Chicago. Burdened with debt and shrunken investments, many consumers are starting to make a greater effort to save. The personal savings rate rose from 2.3 percent in 2001 to 3.9 percent in the first 11 months of 2002.

"If you want to retire before you expire, you have to save more," says Mr. Kasriel.

In addition to the stagnant stock market, many families aren't so sure that home values will rise as much as in the past.

The war factor

The biggest cloud on the horizon is a possible war with Iraq.

"That will kill one quarter of growth pretty well," figures Cynthia Latta, an economist with Global Insight in Lexington, Mass. "Life gets put on hold while you stay at home watching CNN."

Retailers are squealing over holiday sales because they have "over-stored," Ms. Latta says. Consumer spending in 2002 will have risen about 3 percent after inflation. But retailers have to cut this pie into smaller pieces, because they have added stores at an even faster pace.

The threat of war and a four-week-old strike in Venezuela pushed oil prices above $30, up about 60 percent from a year ago.

If Mr. Bush launches a war against Iraq at the end of January or early in February, the price of oil could shoot above $40 a barrel, hitting economies around the world. Should the war be brief, oil prices could plunge back to $25 a barrel, guesses Latta.

Michael Cosgrove, a University of Dallas economist in Irving, Texas, says it would be politically "expedient" for Bush to resolve both the Iraq and North Korea issues by mid-2003. The result would be a large drop in oil prices - a bigger economic boost than a tax cut. "If these issues linger to 2003 or 2004, that places his reelection in jeopardy," he says.

So far, inflation is not a problem. The consensus forecast is a rise of 2.2 percent in the consumer price index in 2003. That leaves the Federal Reserve free to maintain its relatively easy monetary policy. Most economists do not expect the Fed to raise rates any time before the second half of 2003, when economists anticipate an economic pickup.

Refinancing boom slowing

Several factors are restraining growth.

Economists expect the amount of mortgage refinancing to slip perhaps in half in 2003 from the more than $200 billion of activity in 2002. That means fewer householders will have lower mortgage payments.

The amount of economic stimulus from government fiscal policy will also shrink. The shift from a $127 billion surplus in the federal budget in 2001 to a deficit of more than $200 billion this fiscal year gave the economy a shove. But even with a tax cut in late spring or summer, the push will likely not be so great in 2003.

Nonetheless, a federal tax cut could offset a drag on the economy of big state-budget cuts.

Federal tax cuts will enlarge the deficit and the national debt and, in effect, probably reduce the debts of consumers and business as they use some of their tax savings to ease financial burdens.

But the growth of salaries and other compensation has slackened. Many workers face larger health-insurance copayments.

Nor will the US economy get much help from abroad. Most economists see slow 2003 growth in both Japan and Germany, and possibly France and Italy.

Still, most economists consider the 2001 slump a mild one. Martin Sullivan, an economist writing for Tax Notes, a publication for the tax industry, puts figures from this past slump alongside the average of the previous five recessions. The unemployment rate of 6 percent compares with an average of 8.3 percent; a poverty rate of 11.7 percent with 12.9 percent; a median family income of $42,228 with $36,945; and inflation rate of 2.1 percent with 6.3 percent, and an interest rate for a 10-year Treasury bond of 4.2 percent with 11.8 percent.